Shareholders’ right to oppose transfers of shares to third parties

Although the concern is a legitimate one, article 1057 BCC is not understood to be imperative in nature,¹ so the members of a limited liability company can establish their own rules to govern the transfer of shares in their company’s articles of association, including conditions and restrictions on the transfers to other members and to third parties. For example, the members could establish a lower threshold for objections to third-party transfers, or even exclude the right to object altogether. Similarly, they could create a requirement for unanimous approval for all transfers.

The existence of greater restrictions on the transfer of shares in the limited liability company to third parties can be a relevant factor in determining whether the company tends toward a partnership; conversely, lesser restrictions may indicate that the company is more in the nature of a corporation, more centered around capital rather than persons. The solution found in article 1057 BCC, which interprets the silence of the articles of association as an option to restrict the transfer of shares to non-members, comes down in favor of the partnership aspect of limited liability companies, although the application of article 1057 can be excluded.

Interestingly, in one case (Appeal REsp no. 1.309.188/SP²), the company’s articles of association did contain provisions on the transfer of shares to third parties, including a provision giving existing members a right of first refusal to acquire the shares. Despite acknowledging that the rule under article 1057 BCC is not imperative, the Superior Court of Justice (“STJ” – Superior Tribunal de Justiça, Brazil’s highest court in non-constitutional matters), took the position that the provisions of the articles of association were too general, and did not expressly exclude the application of article 1057 BCC. In the STJ’s view, the articles of association were silent on the question of transfers to third parties, because they did no more than mention the possibility of such a transfer if the existing members did not exercise their right of first refusal. In the absence of a specific provision on how the transfer to the third party would be implemented, the rule under article 1057 BCC applied.

Given the freedom that the parties have in drawing up their articles of association, if the members of a company wish to avoid the restriction on transfers of shares to third parties contained in article 1057 BCC, they should take care to set out, in detail, the procedure such transfers, to avoid disputes over whether the restriction has been effectively excluded.